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Gold Falls to Lowest Since July on Federal Reserve Taper Concern

Nov. 21 (Bloomberg) -- Gold fell to the lowest since July as investors weighed speculation that the Federal Reserve may reduce monthly bond purchases in coming months.

Policy makers expect U.S. economic data will signal further improvement in the labor market and “warrant trimming the pace of purchases in coming months,” according to minutes of the Fed’s October meeting released yesterday. Applications for unemployment benefits in the U.S. for the week ended Nov. 16 declined to the lowest in almost two months, the Labor Department said today.

“The market is convinced that the Fed is ready to start tapering,” Sterling Smith, a futures specialist at Citigroup Inc. in Chicago, said in a telephone interview. “Today’s jobless data shows that the economy is improving, and gives people another reason to believe gold will continue to weaken.”

Gold futures for December delivery tumbled 1.1 percent to settle at $1,243.60 an ounce at 1:39 p.m. on the Comex in New York, after dropping to $1,235.80, the lowest for a most-active contract since July 9.

Trading was 70 percent higher than the average for the past 100 days for this time of day, according to data compiled by Bloomberg.

Expectations that the Fed will trim its $85 billion in monthly asset purchases pushed gold toward its first annual drop since 2000. Prices have fallen 26 percent this year as some investors lost faith in the precious metal as a store of value.

Gold is still heading for a significant decline in 2014, Goldman Sachs Group Inc. said in a report yesterday outlining investment themes for next year. Bullion may drop to $1,050 by the end of the year, analysts including Jeffrey Currie wrote.

Silver futures for March delivery retreated 0.6 percent to $19.976 an ounce on Comex, after touching $19.740, the lowest since Aug. 8.

On the New York Mercantile Exchange, platinum futures for January delivery fell 0.6 percent to $1,391.70 an ounce.

Palladium futures for March delivery slid 0.1 percent to $715.60 an ounce.

To contact the reporters on this story: Debarati Roy in New York at droy5@bloomberg.net; Whitney McFerron in London at wmcferron1@bloomberg.net

To contact the editor responsible for this story: Millie Munshi at mmunshi@bloomberg.net

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